Market capitalization for cryptocurrency trading is over $100 billion, and it consistently makes profits despite outside market forces, such as the pandemic.
Although cryptocurrency trading is evidently successful, buying cryptocurrencies poses many challenges. Those who have heard of cryptocurrencies, and even those who have invested in them, have only a vague understanding of how they function as investment tools.
It takes knowledge and expertise to trade cryptocurrencies. Due to the 24/7 nature of cryptocurrency markets, traders must constantly watch charts to avoid an excellent opportunity to buy or sell.
Fortunately, technological tools are available to help novices and seasoned traders understand the crypto market. With artificial intelligence (AI) merged with crypto trading, cryptocurrency trading is undergoing a revolution.
How AI Is Assisting Cryptocurrency Trade
With blockchain technology becoming more prevalent in the cryptosphere, artificial intelligence tools like Bitcode Method are becoming more prevalent, offering some intriguing synergies and assisting cryptocurrency traders with everyday issues.
To predict future price movements, AI may analyze historical data sets related to a given asset, such as its daily price over a year or the frequency with which it has been mentioned on social media.
Inevitably, the accuracy of the forecast depends on the volume and quality of the data, the level of complexity of the mathematical models used, and the computing power devoted to the project.
The Advantages of Using AI in Crypto Trading
The following benefits of utilizing AI in cryptocurrency trading:
Analyze a lot of data: AI can sort through a lot of blockchain data, which may include old market data, articles, forums, and even comments from social media. Data analytics can help investors foresee and forecast market occurrences that might affect prices and help them make wise decisions.
Learning capacity: With advanced artificial intelligence, it is possible to anticipate market dynamics for cryptocurrencies using neural networks. With AI algorithms, exchange rate changes can be tracked, trends can be identified, and changes can be forecast for the next day based on this data.
When given sufficient high-quality data, AI systems are capable of high accuracy. For example, the Bitcode Method platform claims to be capable of forecasting cryptocurrency markets with up to 85% accuracy.
The Disadvantages of Using AI in Crypto Trading
Like other emerging technologies, AI has both benefits and drawbacks. The following are some drawbacks of utilizing AI in trading:
Overfitting: Overfitting is the process of incorporating too much data into statistical models in machine learning. Trading algorithms may sometimes receive too much historical data. However, it may reduce trading tactics’ flexibility and affect results. The bias towards favorable results could also lead to a false impression that a particular strategy would perform as expected in a real-world market.
The opposite of overfitting is this. Insufficient data are discussed in relation to statistical models. A lack of high-quality data can hinder machine learning models, leading to many inaccurate predictions.
An artificial intelligence tool can’t be completely foolproof, no matter how intelligent and sophisticated it might be. There are times when even reliable algorithms fail. Mistakes will inevitably occur in a fast-paced environment such as trading.
Technology is popular among crypto traders and enthusiasts who use it to automate the process of AI crypto trading, which is the fastest-growing sector of the entire crypto market. Traders of all levels can use artificial intelligence to execute technical and fundamental analyses on crypto exchanges and profit from trading assets.
In the last five years, the HODL strategy was king, but now technology is making it much more sophisticated and dynamic. As a result, a hands-off approach to crypto trading is rapidly gaining traction. With such a high adoption rate in trading, automation is here to stay